US FX WRAP: DXY little changed; CAD & EUR benefit from oil rally

DXY was little changed as markets proved choppy through further geopolitical escalations, higher energy prices, and ahead of GOOGL earnings. US data and Fedspeak again took the backseat given the lack of data and Fed being on blackout, keeping the Middle East conflict as the main focus. Oil prices settled higher on continued strikes between the US and Iran, and more threats from both sides on hitting key infrastructure. The key headline to watch now is any further attacks from Iran on ships in the Strait of Hormuz, given Trump is now saying if that happens he will hit Iran's bridges/power. In return, Iran has said they'll hit energy facilities in the region. On the flip side, Trump's threats in the past on Iranian infrastructure have led to a U-turn, resulting in a diplomatic approach, and as such, markets will be aware of that USD downside risk.CAD and EUR outperformed, with higher oil prices providing an economic growth offset for the former, while hawkish repricing for the ECB has continued to help the Euro. Meanwhile, CHF continued to lag against the dollar. ING notes that USD/CHF rather than USD/JPY could become an increasingly popular vehicle for these summer months, and if energy prices have another leg higher, "USD/CHF could deliver some powerful follow-through on a break of 0.8150/70 resistance". USD/CHF now sits around highs of 0.8148JPY saw a bout of strength in response to reports that the BoJ is said to be open to a hike faster than every six months, a more hawkish view than the general analyst consensus that the BoJ would stick with its usual six-month hiking pace. Bloomberg added that some members are seeing evidence that companies are passing higher costs to customers faster than in the past. USD/JPY hit lows of 162.66 before paring the entire downside.GBP was little moved by the mixed UK inflation report, which ultimately suggests the BoE keep rates unchanged through year-end. Headline Y/Y cooled at a faster rate than expected, now 0.5% below BoE’s April forecast; Services cooled in line with BoE's forecast due to volatile airfares, while core metric stood at 2.6%, in line with BoE forecast.